Share

KPMG’s Nkuhlu promises drastic action

KPMG’s new chairperson designate, Wiseman Nkuhlu, is at a loss for words to describe what the disgraced firm did wrong.

In a 30-minute interview this week, Nkuhlu described KPMG’s two known local scandals as, successively: “mishaps”, “shortcomings”, “mistakes”, “errors” and “blunders”.

KPMG still faces at least two separate investigations and there has been an exodus of clients since revelations about its work for the Guptas and the taxman last year.

Until these investigations deliver evidence of intentional wrongdoing or corruption, Nkuhlu will keep assuming it was all due to lapses of judgement, not intentional fraud, he told City Press.

“You may have information I do not have, information that the wrongdoing was intentional – I am waiting for the investigations to come up with that information,” he said.

“On the information I have, there is nothing to support saying the two or three guys managing these relationships intentionally facilitated that ... I cannot pass judgement beforehand. I did not come with a preconceived position that there are people here who are corrupt.”

“Political naivety” could explain how KPMG SA facilitated or, at best, missed money laundering by the Guptas – and made “findings” it was instructed to make for the SA Revenue Service in its infamous “rogue unit” report that led to a purge of senior Sars officials.

“When you are in an environment like South Africa’s the dangers of political naivety – just interfacing with people who are highly connected and all that and not having the courage to actually approach that relationship with the necessary scepticism and rigour – there are always dangers of that,” said Nkuhlu.

The profession as a whole faces an ever-increasing pressure to make money that could compromise standards.

“I think the pressure in the environment has increased over the years, in terms of new ways of making money quickly, and that influences attitudes of professionals.”

In September last year KPMG apologised for the Sars rogue unit report and offered to repay R23 million to Sars – and to donate R40 million in fees from Gupta-owned clients to charities.

It kicked out CEO Trevor Hoole, chief operating officer Steven Louw and chair Ahmed Jaffer.

In October the Independent Regulatory Board for Auditors (Irba) launched its investigation after Sars laid a complaint. In November the SA Institute of Chartered Accountants (Saica) initiated a separate inquiry headed by advocate Dumisa Ntsebeza.

“When I look at the terms of reference [of the investigations], to me they are broad enough to reveal whatever things have gone wrong and then we as the board will have to deal with the findings.”

Nkuhlu said he took the job to fix the damage done to the entire chartered accountancy profession.

He has been, among other things, president of Saica from 1998 to 2000. 

“When there were these reports about these two issues [at KPMG] that eroded public trust in the accountancy profession, I was very disappointed and angry ... I was thinking about my own standing in society as a accountant. As a leader I had to stand up,” Nkuhlu said.

“This thing has damaged the profession and there must be consequences for those who were responsible for these mishaps or these blunders.”

“After engaging a number of times they [KPMG] approached me. I am going to use my knowledge and experience to really try to redeem KPMG.”

That wedding

Much has been made of KPMG partners attending the extravagant wedding at Sun City that catapulted the Gupta family into the national consciousness in 2013.

The wedding itself was funded by money laundered out of South Africa under KPMG’s watch.

Would Nkuhlu have attended?

“With hindsight, it is easy to say no. It is a serious decision for you as leadership of an accounting firm to be invited by a client to a high-profile event like that. You look carefully at that.

“I do not know if the outcry about the landing at Waterkloof was already in the media – I do not know. If it was, I would not have gone,” said Nkuhlu. “It is not an easy one. At that time were the red flags already clear? Were there already media releases and things saying there was something improper about the relationship?”

What to do 

Nkuhlu promised “drastic” actions at KPMG when he takes the chairperson’s position at the end of February.

“It is going to require a rigorous review of governance practices as well as a rigorous review of risk management processes … that is what I am going to be leading – those reviews.”

Accountants must remember their “higher calling”, he said.

“Auditors primarily serve the public interest, not only their clients. They must account to the public by being really objective, independent and also sceptical and not accepting answers without getting evidence.”

One issue is the procedures that must be followed when taking on clients.

“And regular reviews of your client relationships. That must be done and overseen independently of the partners that service those clients. I am going to be going deep into that. We cannot allow the profession to be overwhelmed by this drive for material wealth. If you do that the whole private enterprise system, in my view, will be very difficult to sustain.

“The way to mitigate those threats is rigorous risk management processes that are independent of the partners involved,” he said.

“They must be subject to an independent review by an independent risk-management team accountable to the board. Those risk management professionals must not be measured by the revenue they bring to the firm, they must focus strictly on risk management and look at the relationships developed and the way work is conducted.”

Links between remuneration and revenue “is the kind of thing I will look at”, said Nkuhlu. “There should be no link between pay and the amount of fees they procure for the firm. It should be dependent on how the firm as a whole performs.

“As auditors they should make sure they are not driven by self-interest and just getting more revenue. This thing of greed has become dominant in society. Now the audit profession should be the institution that validates and verifies that representations are faithful and not exaggerated because of greed.”

Nkuhlu has taken the job without really knowing what new scandals might be uncovered.“I will take it as it comes. I am not looking for popularity here. I am not going to be covering up.”

His appointment was finalised only this week and up to that point there was a limit to the information that could be shared, he said. “I have a commitment that they [KPMG] will make all information available to me,” he said. “What I have asked is a meeting with Irba and advocate Ntsebeza as soon as possible and I am prepared to make sure we cooperate.”

Nkuhlu said he does not yet have a view on the so-called Sars Five – officials hounded out of office on the basis of the KPMG rogue unit report that has subsequently been retracted.

KPMG last year apologised to Pravin Gordhan for the damage caused by this work.

* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.92
+0.1%
Rand - Pound
23.88
+0.1%
Rand - Euro
20.38
+0.2%
Rand - Aus dollar
12.32
+0.2%
Rand - Yen
0.13
+0.1%
Platinum
908.05
0.0%
Palladium
1,014.94
0.0%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders